tv Nightly Business Report PBS November 17, 2011 1:00am-1:30am PST
>> tom: just one week to go until the congressional super committee hits its deadline to cut over $1 trillion in government spending. >> whether we like it or not, this debt and deficit debate has become in effect a proxy for whether our democratic institutions are up to the job in the twenty-first century. >> tom: meantime, oil jumps to over $100 per barrel. why more oil could lead to higher prices. it's "nightly business report" for wednesday, november 16. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt >> tom: good evening and thank you for joining us. susie gharib will be along later in the program. two big stories in the markets today-- europe and oil. first? europe. fitch ratings this afternoon said u.s. banks have manageable exposure to europe, the analysis warns if the european debt crisis is not fixed soon, the broad outlook for american banks "will darken." fresh worries about europe's debt crisis spreading were all it took to send u.s. stocks sharply lower in the final hour of trading.
the dow tumbled 190 points, the nasdaq lost 46.5 points and the s&p 500 down almost 21. trading volume picked up-- 915 million shares moving on the big board. nasdaq traded just under two billion shares. the day's other big story? the surge in oil prices to over $102 a barrel. that's oil's first push in five months above the $100 mark. behind the move? enbridge's deal to reverse a key pipeline. that action will let 350,000 barrels of crude a day flow out of land-locked cushing, oklahoma, pushing the glut of oil sitting in the midwest to other regions for refinement. john kilduff is an oil analyst and partner at again capital. he joins us live from the nasdaq. nice to see you again. so why would more oil to
refinery row in sdpekz the gulf coast mean higher oil prices? >> well, they say all politics is local, tom, and in this case all markets are local as well. imagine if you had a bumper crop of wheat or really anything on hand, but you couldn't get it to market. what's it worth to you? what's it worth to the world, really nothing because it's stuck where it is and it can't get to the places that need it. what we're seeing here today is that the oil in oklahoma that the contract trades against got liberated or will be liberated shortly, so what we've been seeing with the depressed price relative to all the other global markers for crude oil around the world is now seeing a correction. where that wti oil, that curbing, oklahoma oil is now almost as valuable as all the other oil in the world. >> tom: you're talking about west texas enter media. i want to put on the screen the police differential you're refering to, between west texas crude and the north sea brent, the global benchmark at
112. what happens to this? does brent wind up going down or does u.s. benchmark oil go up to the $111 mark? >> today was both. today we saw wti crude soar, as you said to nearly 103 a barrel, over $3 price rise. but brent crude was down about dollar and a half. at one point this month brent crude was about dar 25 higher price than this wt crude. today the differential got down to $9. the historical difference was that the wti oil was about 1.50 to $2 higher the brent oil, which represented the transportation cost from the north sea to our texas and oklahoma refineries. >> tom: so does that mean u.s. oil at $115 a barrel then if you go back to historic norms? >> no. i think the price action you saw today is the bulk of it. i would look for those prices maybe to go a bit heyer to
205. but there's real difficulties in the european economy and the chinese demand that should allow both of these prices to fall back under $100 relatively quickly. >> tom: that's on the demand side. as we've seen with inventory supplies generally are plentiful. talk to us about the infrastructure of delivering in the united states, when one single pipeline in oklahoma reverses, goes 180 degrees and you see this kind of price spike. what does it say about our energy infrastructure? >> well, it's tight, and it very vulnerable and there's a lot going on in this activity. getting what puts these wti prices down has been the advances and the rise in domestic production in north dakota, in they'll oil, and obviously all the oil that's coming from canada, and there's a big debate as you know about getting even more oil down from canada via another big pipeline that wants to be built. we need more. the oil around the world is relatively tight. and to the extent we see any pickup in economic activity, oil prices are the first to go up. because it is the commodity
that becomes the most dear, the most quickly, as people start to drive and drive more and transport goods more. >> tom: just 30 seconds left here. sounds like you're looking for oil prices to go a little bit in the short term but downover all because of global demand. we've never seen oil at $100 a barrel in the winter time, have we? >> no, we have not. and even the price of heating oil, diesel fuel and gasoline are spectacularly high for this time of year and it's coming at probably the worst point in time for the consumer with the holiday shopping season upon us. we're going to be seeing $4 a gallon gasoline, i think though as we turn the corner to 2012 the poorer economic conditions in europe will result in lesser demand and there's more oil coming on line, by the way, from libya and iraq is at prewar highs now. so a lot of this should relieve skpts get these prices lower, which will be a big help to get us through what looks like a tough 2012 economically. >> tom: just got to wait until next year for that. john, we appreciate the insights, john kilduff, a partner at again capital.
>> susie: i'm here at the federal reserve bank of new york where i just wrapped up my exclusive interview with its president, bill dudley. he's the second most powerful person at america's central bank after chairman ben bernanke. tomorrow we'll bring you his plan for fixing the economy. >> the important thing i would emphasize on monetary policy is we can do our part, but there are other things that could also be helpful and complementary. housing and fiscal policy are two of the important ones. >> tom: join us tomorrow for susie's exclusive interview with new york federal reserve president bill dudley. also tomorrow, we'll talk about the global economy with one of the biggest private equity investors there is, steve schwarzman, c.e.o. of investment firm blackstone. still ahead on tonight's program, from restaurants to parking lots and t-shirt printers, the small companies on the sidelines thanks to the n.b.a. lockout. with about one week to go, the members of the so-called congressional supercommittee are
far apart on an agreement. and just like the debt ceiling debate from a few months ago, the two sides are running out of time to agree to cut more than $1 trillion from the deficit over the next ten years. darren gersh takes a look at the last push to bridge the gap. >> reporter: a looming deadline, emergency meetings, falling expectations. no, we're not talking about europe. that's what's going on with the congressional supercommittee. super committee republican co- chair jeb hensarling this afternoon blamed democrats for the deadlock, saying they have not put a serious offer to tackle health care spending on the table. >> i'm looking for a solution. they've rejected a republican solution, they've rejected a bipartisan solution. we wait for their solution. >> reporter: democrats pointed back, saying republicans preferred to trim medicare benefits rather than raise taxes on the well-off. with hopes for an agreement fading, a bipartisan group of lawmakers urged negotiators to up their target. instead of $1.2 trillion in
cuts, they called for $4 trillion or more. >> i'm very proud to stand here with these folks today and say "supercommittee, we've got your back. we support you. we look forward to working with you on whatever course you decide to take to make sure that we do the right thing for the american people, as well as to continue to show that america leads the financial free market." >> reporter: what are markets making of this mess? they are focused on europe for now. the baseline assumption is the supercommittee will cobble together a package including small cuts in everything from agriculture to health care. the troop withdrawal from iraq could also be counted as a peace dividend. >> it's clear that real, fundamental changes are not going to happen, so they're going to be looking at very, kind of soft savings, low- hanging fruits, things that have been discussed for that last, many, many months. >> reporter: the financial crisis of the last few years has
shown markets can lose faith in a country quickly, a fact that is not lost on members of congress who continue to hope for a debt cutting break through. >> whether we like it or not, this debt and deficit debate has become in effect a proxy for whether our democratic institutions are up to the job in the twenty-first century. >> reporter: the supercommittee must deliver something by monday at the very latest if it's going to make its deadline. and a complete failure is not the kind of headline likely to restore confidence ahead of the christmas shopping season. darren gersh, "nightly business report," washington. >> tom: the controversy over a solar company going bankrupt despite big loans from the government comes under more scrutiny tomorrow. u.s. energy secretary steven chu will face lawmakers tomorrow about solyndra. the solar panel manufacturer went bankrupt in august even though it had received $528 million in loans from the federal government. the department of energy says when it chose solyndra to receive a half-billion-dollar loan from the government, the company had undergone a vigorous
vetting process and they didn't expect it to fail. more than three months after the solar manufacturer closed its doors, u.s. energy secretary chu is set to defend his position his testimony follows a new wave of scrutiny about the administration's handling of the loan. a memo released yesterday by the house energy and commerce committee shows the financial trouble wasn't a complete surprise, and in fact, in 2010, the administration asked the company to postpone layoffs until after the midterm elections. analysts say although solyndra was never a giant in the solar industry, its high-profile demise could dim the lights on an industry that depends on government subsidies to stay afloat. >> it is essentially still required, because this is not being done on a strictly economic basis. there are pockets of solar demand, and it will get larger as demand recovers, but government is the answer right now and if solyndra is a reason why government has turned away from solar, then its a very big deal for the near term.
>> reporter: in prerelease testimony secretary chu is says in his testimony he hopes solyndra's failure doesn't stop the u.s. government from investing clean energy. oil was rallying, but stocks sank into the closing bell over renewed worries about europe's problems hurting american banks. let's get to tonight's "market focus." the stock market had a weaker tone throughout much of the day, but that turned into significant pressure in the last hour of trading.
the daily chart of the s&p 500 shows the late-day damage. the selling picked up just after 3:00 p.m. eastern time, closing at its low of the day, spooked by the warning from fitch ratings about u.s. bank exposure to european debt problems. the broad financial sector certainly saw red today. the financial exchange-traded fund dropped more than two 2%. the drop takes the fund to its lowest price since mid-october. this sector led the losers today. morgan stanley saw the biggest losses in the financial sector. shares plummeted 8%. volume was heavy too, pushing the stock down to its lowest since early october. a unit of the bank has agreed to pay $3 million in fines and penalties. the deal settles allegations it charged u.s. investors for financial advisory services they never received. morgan stanley neither admitted nor denied the charges.
also pressuring financials was derivatives exchange c.m.e. group. the stock fell below its october low, down 6% to a three-month low on heavy volume. the exchange is among the regulators wrapped up in the implosion of brokerage firm m.f. global and its missing client money. while the c.m.e. has offered $300 million of its own money to help, former m.f. global customers have complained the c.m.e. has been slow to respond. the leading losers on the dow were banks too. bank of america fell back below $6 per share. we'll have more on b. of a. coming up in our "street critique," and j.p. morgan fell more than 3.5%. we mentioned at the beginning of the program the jump in oil prices as new supplies are expected at refiners along the gulf coast. that could mean a drop in refinery margins, sending those stocks lower. marathon petroleum, tesoro and valero each fall by at least 9%. a week before the holiday shopping season officially kicks off and target turned in these third quarter results, beating estimates by eight cents per
share. the company says it feels very confident about its holiday outlook. target shares couldn't fight the weak tape today though, falling a fraction. one note on target's competition against walmart? target says holiday toy sales have been slow, hurt by walmart offering a layaway plan. one more from retailing, abercrombie and fitch. the stock took a nose-dive, shedding more than 13% on 10 times average volume. the company warned of weak margins over the holidays even as it continues expanding internationally. in a long-fought legal case, semiconductor makers micron and rambus saw some big moves. micron jumped 23% while rambus fell hard, down 60% after being halted. a jury ruled for micron in a case that saw rambus claimed micron engaged in price fixing to prevent it from getting a foothold in the memory chip market.
the jury rejected that argument. and that's tonight's "market focus." >> tom: it's the lowest priced stock in the dow jones industrial average and it consistently ranks as one of the most actively traded stocks every session. tonight's "street critique" guest thinks better days are ahead for the embattled bank of america. she's hilary kramer, author of "the little book of big profits from small stocks." below six per share, it shrinking in market value. what do you expect out of it? >> bank of america should hit $10 a share in the next 12 to 18 months, tom, there's so much going for this company, including scale, the fact that they have branches, they have
a consumer as well as a commercial bank, and they have a loyalty that they are trying to win back on customers, and that's part of the reason i think the stock fell, in addition to the fact that of course they had a bad quarter, even though they still made $6.2 billion. but a bad quarter because of interest rates, and the weak capital markets. but at the end of the day, bank of america, they're capital position is much stronger than it has been, even in 15 years. >> tom: here's the knock on b of a, it's been unable to raise its dividend, regulators aren't allowing it to increase its payout to shareholders, it face us more lawsuits over its mortgage business, and it's pressure with all these new regulations and coming up with new fees and the public relations fiasco that comes along with that. >> i agree with all of that. but bank of america is working through all of those issues, one by one. they're reducing expenses, probably $5 million between now and 2014, dealing with the
new compliance issues, they put all of that in place and have already take ten hit of the cost of putting that in place. and that's one of the biggest drags on banks today, are the new regulations, and in terms of mortgages, they're working through those, and they've taken a lot of reserves for what will be settlements on these mortgage losses. >> tom: let's update a couple of stock picks from previous appearances. the e-mail, chris writes us this note. several months ago you recommended viola environment, given the highly leveraged balance sheet, do you still believe v. e. is a good investment? it was back in the middle of may when you first mentioned it, over 30 tonight, despite a nice double digit yield. >> it has been a big disappointment, because it's a french companies, all the french companies have come down. but veiola served the emerging
markets, they can go into a municipality and provide clean water, waste management, their average contract is 20 years. it's a better opportunity now than it's ever been. it's amazing though how much this stock has been sold off. there is debt there, about 13 billion euros of debt that will come due, 15% of it in the next six months to two years. but that's okay. i'm still bullish on v. e., but over the long term. you get a dividend, you get paid to wait, part of the way these stocks have fallen because of overleveraging but a number of countrys in europe. >> tom: i know you're talking about small stocks in the new book, these are two big stocks that have dropped significantly. do you have positions in both of them? >> i have positions in both of these, and with my new little book of big profits from small stocks, i look at companies like bank of america. it's one of those opportunities where you can turn around and you can double your money.
the government is not going to let bank of america fail. and the french government isn't going to let veiola go down. >> tom: you can e-mail us your questions at nbr.com. hilary kramer is also at gamechangerstocks.com. here's what we're watching for tomorrow: we'll see weekly jobless claims and just how many homes contractors broke ground on last month. on the earnings front, dole food, dollar tree and gamestop all scheduled to report results. also tomorrow? don't miss our exclusive interviews. president obama wants automakers to double fuel efficiency by 2025, but they need congress' approval first. is meant to reduce u.s. dependence on oil imports and cut pollution. the industry will have five years to develop fuel-saving technology before the rule starts to gear up in 2017. if the plan gets ok'd, it is
expected to save drivers $6,600 in fuel costs over the life of their vehicle. italy's fiat, which now owns chrysler, says its new jeep will help boost sales and withstand uncertainty in the european auto market. chrysler plans to spend half a billion dollars at its ohio assembly plant to build that new vehicle and add over 1,000 jobs by the end of 2013. c.e.o. says jeep is their best brand by far.
with the great recession and the wave of belt-tightening that ensued, many americans have gotten reacquainted with the pleasures of being homebodies. in the "money file," how the economy has changed the way we live. here's donna rosato, senior writer at "money magazine." >> you don't need anyone to tell you that the financial crisis has taken a big toll on your investments, your home value, even your job security. but whether you like it or not, the worst economic crisis since the great depression has also fundamentally changed the way we manage our money. are you eating out less often? are you putting more money away for a rainy day? are you borrowing less? then you too are part of the new austerity mindset where splurging is out and being thrifty is in.
our editors at "money magazine" partnered with "time magazine" for a survey comparing consumer financial habits immediately before the 2008 meltdown, right after and again this summer. it revealed a profound shift in financial attitudes. nearly two thirds of people surveyed said they're cooking more at home and building an emergency fund. they're focusing less on material things and spending more time with family. people are shopping around for deals and using coupons. no wonder that reality shows like "extreme couponing" are watched by millions of people. will it last? 83% of people say they will remain frugal in the future. that means this appreciation of bargains and budgets is here to stay, at least until the next economic boom. i'm donna rosato. >> tom: finally tonight, the national basketball association lock out has reached day 139 and still no resolution. the n.b.a. games are now cancelled through december 15. two players have filed class- action antritrust lawsuits against the leagues in two
states. but now basketball-related businesses, and the ripple- effect jobs, are on the sidelines, hurt. the n.b.a. may be a big business, but it's small businesses and their workers now feeling the bite of no basketball. in miami, at the american airlines arena, the home of the miami heat, parking lot businesses on game night often score up to $30 per vehicle. now they're parking cars for under $5. restaurants around the arena, like largo bar and grill, are normally packed this time of year-- now they're being forced to cut back. my servers are definitely feeling the pinch now. same with my cooks. they're not getting the overtime. they're not getting all the hours they need. there's the trickle-down effect: it goes down to my purveyors, my suppliers-- i'm not ordering as much. >> tom: in fort lauderdale, atlas embroiderys has cooled its presses. normal production is 20,000 to 30,000 t-shirts a day. with the heat in action on the court, it's double that. even though the printing company has deals with adidas and reebok, the lockout has atlas crying foul over its financial outlook. >> we're not hiring additional
people, we're not hiring additional-- the part-timers that we normally bring on to do the fulfillment, that do the stuff on the machines. >> tom: miami's not the only place where city coffers are suffering losses. last year, the indianapolis capital improvement board loaned the indiana pacers $33.5 million to keep them in town. the board is losing $125,000 in taxes for every game not played. no pacer basketball at all could add up to more than $50 million in local losses. >> downtown indianapolis is the economic engine not only for the city and county, but also for the entire state. you have restaurants, arts and facilities, hotels, and taverns and bars all very close to conseco field house, and they're going to feel the pain as well. >> tom: indianapolis hasn't put all its economic balls on basketball. it hosts super bowl 46 in
february. that's "nightly business report" for wednesday, november 16. i'm tom hudson. good night everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> be more. pbs.